Common area maintenance charges classified as contractual service payments, therefore subject to tax deduction under contractual-payment rules rather than rent rules.

Common area maintenance (CAM) charges paid separately from rent and directed to upkeep, utilities and cleanliness are characterised as contractual payments for services rather than consideration for use or occupation of premises; accordingly the legal tests distinguishing rent from service/works payments are applied and CAM charges fall outside the concept of rent. The operative effect is that CAM charges are not subject to tax deduction under the rent provision and instead attract tax deduction at source under the provision applicable to contractual payments for services, to the benefit of the payer assessed as per that classification.

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Issues: Whether common area maintenance (CAM) charges are liable to deduction of tax at source under Section 194-I of the Income-tax Act, 1961 (as rent) or under Section 194C of the Income-tax Act, 1961 (as contractual payment for services).

Analysis: The Court examined whether CAM charges constitute payment for use of premises (rent) or are payments for maintenance services that are contractually distinct from rent. Prior decisions of the Tribunal and this Court were applied to the undisputed factual matrix where CAM charges are contributed towards shared expenses for cleanliness, utilities and maintenance, payable separately from rent and often to different vendors. The Court treated CAM charges as payments for services/works for maintenance of common areas rather than consideration for use or occupation of premises; accordingly, the statutory tests and judicial authorities distinguishing rent from contractual payments for services were applied to classify the nature of the CAM charges.

Conclusion: CAM charges are not rent within Section 194-I of the Income-tax Act, 1961 and are chargeable to deduction of tax at source under Section 194C of the Income-tax Act, 1961. This conclusion is in favour of the assessee.

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